The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Toyota Jinnah Motors (Pvt.) Limited

Rating Type Entity
(18-Jan-21 )
(19-Feb-20 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

Car dealership (authorized) hinges on the robustness of principal (auto/ manufacturer, assembler). The strength of car dealer is contingent to the relatively positioning of principal in the respective market. There is a pre-set qualitative & quantitative criteria – imposed by principal on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance to Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation. Toyota Jinnah Motors (TJM) holds 4S car dealership. Over the period of time TJM has built a sustainable position in the competitive industry of Pakistan. TJM’s income streams derived from sales of new vehicles (40%) and after sales services (60%). The profitability is being supplemented by the 'After Sale' segment - reporting net profitability for the dealership and covering its operational cost. Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity. In past demand of new automobile adversely affected due to general economic slowdown, massive rupee devaluation and rising of interest rates. Outbreak of COVID-19 further deteriorated the industry’s performance. Government took various measures and introduced various relief packages for revival of the economy and industry, automobile financing became cheaper due to reduction in policy rates which is a positive sign for the industry. The Company is expected to receive benefit under the leadership and knowledge of new shareholders, during the period under review ownership structure of the Company has been changed. Mr. Khursheed Ahmed has been replaced by Mr. Muhammad Mushtaq who is a successful entrepreneur in real estate development sector and Mr. Muhammad Idrees who has now associated with the board as an executive director with more than one decade of experience in managing automobile dealerships. The financial risk profile of Toyota Jinnah Motors is adequate. Company has substantially reduced its short term borrowings from financial institutions through sponsors support.
The ratings are dependent on the management's ability to sustain its business profile while benefiting from positive demand fundamentals, financial discipline/transparency is crucial. Moreover, strengthening of governance framework is pivotal for any growing business concern.

About the Entity
Toyota Jinnah Motors, incorporated on Jan 17, 2014 as a private limited company and inaugurated its operations on 2nd June 2016. The Company was incorporated to set up 3S authorized dealership (Sales, Service and Parts) of Indus Motor Company Ltd, the partners of Toyota Motor Corporation Japan. The Company is majorly owned by Mr. Muhammad Mushtaq (Chairman), Mr. Muhammad Idrees (Director) and Mr. Asad Munir CEO of the company.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.